Belarus Joins the Flat Tax Club

It seemed like 2008 was going to be a bad year for tax reform. After a flurry of activity in 2006 and 2007, which resulted in 10 new countries adopting simple and fair flat taxes, the global shift to better policy ground to a halt.

Fortunately, Belarus has picked up the baton of tax reform, replacing a so-called progressive system with a top rate of 35 percent with a 12 percent flat tax. So after a period of inactivity, it’s time to once again cue up the theme song of the flat tax revolution.

The Financial Times has more details on fiscal liberalization in Belarus:

Life is improving for private business in Belarus, albeit from a position in which arbitrary action was the hallmark of economic policy. … Taxation remains high by regional standards, with general government revenue at over 45 per cent of GDP, compared with 30.5 per cent for Ukraine and 20 per cent for Russia. … Overall, says the deputy finance minister, Vladimir Amarin, next year’s budget will reduce the tax burden by 1.3 per cent of gross domestic product, and future budgets will shave a further 2.4 per cent of GDP off it. The nationwide turnover tax, which last year was 3.4 per cent, will be phased out entirely by 2010, while local sales taxes are, from 2009, to be levied at a flat 5 per cent rate from a 5-15 per cent scale. Personal income tax, hitherto levied according to a progressive scale of 9-35 per cent, will be a flat 12 per cent. … “The tax burden is now lighter and the system is simpler” says Dmitry Duchitsky, chief executive of lingerie maker Milavitsa, a major beneficiary of the planned reforms.